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What should be my allocation to gold and international funds?

Consider gold only as insurance to your portfolio, advises Dhirendra Kumar

What kind of allocations would you suggest for gold and international funds in a portfolio?
- Jeewan

I look at them very differently. For me, gold is a kind of insurance for your overall portfolio. Gold is the oldest asset and I consider it as a store of value instead of an investment. Right now the value of gold has gone up for some speculative reasons. Whenever the market goes into a tailspin and there is greater uncertainty, gold gets pricey. From that standpoint, I think there should be an allocation to gold but it should not be considered as an investment. It should be looked upon as a store of value which will preserve the value in worst of times. The allocation to gold for the sake of insurance depends on the scale. It should be meaningful enough, at the same time don't look at it as an investment.

To international equity, I look at it purely as an equity investment. And I think it is an important equity allocation which an investor should have. We have our jobs here, we have our investments here, we have all our assets here, no matter it is home or anything else. So, having an investment which is not co-related to it is a good idea. Other thing is that there are great companies in which you can invest with simplicity. The allocation could be anywhere between 25-50 per cent of your total investment. While investing abroad, you also get an opportunity to invest in very compelling companies, which are otherwise not available here. And I don't think it is adding any risk to your portfolio. It is rather giving you greater diversification, enhancing the quality of your portfolio and reducing your risk with that diversification.

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